The fight for volume is being waged on several fronts at tobacco giant Imperial Brands (IMB). War-torn Iraq and Syria left a dent in group volumes equivalent to 4.4bn sticks, with the pair now representing half the proportion of total group volumes than they did last year. In countries such as Ukraine, where the currency has been significantly devalued, chief executive Alison Cooper said decisions had been made to "let share go" given the competitive discounting which had taken hold there. Volumes of the newly acquired brands from US rival Lorillard (US:LO) rose 6.2 per cent, or 8.6bn stick equivalents, which throws a 6 per cent decline in group like-for-like sales into sharp contrast. Overall, group volumes were down 3.1 per cent to 133.9bn stick equivalents.
Ms Cooper reiterated the company's focus was about "quality growth", a phrase she repeated several times on the results call. She said the US business was central to this: the company's growth brands, including Winston and Gauloises, and specialist brands, including Skruf, now together account for 58.6 per cent of net tobacco revenue. In the geographies it calls "returns markets", such as the UK, Spain, France and Germany, the strategy is about balancing profitability with market share. This strategy will prove critical as tobacco volumes have fallen 5 per cent in the UK, according to Ms Cooper.
The development of e-cigarettes will also be key. The company boasts a 14 per cent share of the world's tobacco market, leaving plenty of new customers to lure in the tobacco-less market. "This presents a great opportunity for us to attract smokers into the category," said chief development officer Matthew Phillips. Interestingly, the group is now licensing out its first-generation technology to other e-cigarette companies, while launching second-generation products itself.
Analysts at Credit Suisse expect adjusted pre-tax profit of £2.94bn in the 2016 financial year leading to EPS of 241p compared with £2.62bn and 212p in FY2015.
| IMPERIAL BRANDS (IMB) | ||||
|---|---|---|---|---|
| ORD PRICE: | 3,696p | MARKET VALUE: | £35.4bn | |
| TOUCH: | 3,694-3,696p | 12-MONTH HIGH: | 3,898p | LOW: 2,926p |
| DIVIDEND YIELD: | 3.9% | PE RATIO: | 31 | |
| NET ASSET VALUE: | 509p* | NET DEBT: | 266% | |
| Half-year to 31 Mar | Turnover (£bn) | Pre-tax profit (£bn) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2015 | 12.1 | 1.05 | 89.5 | 42.8 |
| 2016 | 12.8 | 0.45 | 30.4 | 47.0 |
| % change | +6 | -57 | -66 | +10 |
Ex-div**:19 May & 18 Aug Payment**:30 Jun & 30 Sep *Includes intangible assets of £19.4bn, or 2,025p a share **Dividend paid quarterly | ||||
